An expected study on the future value of e-commerce to the healthcare industry was released last week with the expected conclusion: Buying healthcare supplies electronically benefits all participants in the supply chain, although that benefit is slight.
Once the healthcare e-commerce market matures fully, online purchasing could reduce overall costs by as much as 10%, or $6 billion, according to the study.
The study was conducted by the Dallas-based healthcare supply-chain practice of Andersen and sponsored by group purchasing giant Novation and its e-commerce partner, Neoforma.com. Modern Healthcare disclosed the preliminary findings of the study, which began in November 2000, in May (May 7, p. 26).
When the expected benefit was analyzed by segment, manufacturers stood to gain the most by far: a 1% to 7% savings. The potential cost benefit for providers was 1% to 2%; for distributors, it was 1%.
The study's prediction that suppliers will benefit significantly from e-commerce comes at a crucial time for Neoforma, which is working feverishly to achieve a critical mass of customers at all levels of the supply chain. The company's recruitment effort especially concentrates on manufacturers that have initiated competing e-commerce ventures and resist participation in Neoforma's Internet marketplace. To spur the effort, Novation last fall instituted a policy requiring would-be suppliers to do business with Neoforma if they wish to do business with Novation.
The study is based on data analyses and on interviews at all levels of the supply chain: hospital, manufacturer, pharmacy wholesaler and distributor.
For hospitals, the major potential benefit is eliminating overpayments and accelerating the process of purchasing. Suppliers would benefit by freeing salespeople from administrative tasks.
Among the study's key findings:
* Hospital purchasing departments could see as much as a 52% reduction in the amount of work caused by processing errors.
* Among manufacturers, early adopters of e-commerce could record a 14% gain in revenue by refocusing their sales forces, while their competitors waste as much of 49% of their sales forces' time on administrative tasks that could be eliminated by e-commerce.
* At distributors of medical-surgical supplies, sales forces spend just 14% of their time selling products, devoting the rest to customer service issues.
Stanford University Professor Charles Horngren and Harvard University Professor V.G. Narayanan, who reviewed the Andersen study, suggested in their foreword that the healthcare supply chain has been slow to adopt e-commerce because of "fuzzy assumptions" and "unclear methods" used to estimate potential savings. In contrast, the Andersen study offers organizations a useful template to gauge expected savings before signing on with an e-commerce provider, the professors said.
Still, they had words of caution: "It is important for any stakeholder in the healthcare supply chain ... to estimate e-commerce savings potential independently by applying the methodology developed in this study to its own setting."
In addition, they warned, "Healthcare supply chain managers should consider that realization of the promised savings involves systematic follow-through to ensure that plans are executed-while making rough tradeoffs and painful decisions."